November 27, 2006

Gazprom plans steep price hikes in Belarus, Baltics : reports

MOSCOW - Russian gas monopoly Gazprom plans major price increases for deliveries of natural gas in 2007 to ex-Soviet Belarus and the three Baltic states of Estonia, Latvia and Lithuania, newspapers in Russia reported.

Gazprom, which controls the world's largest reserves of natural gas, will quadruple prices for Belarus, a close ally of Russia, according to Vedomosti daily, citing the company's 2007 draft budget.

Gazprom expects Belarus to pay 200 dollars (153 Euros) per 1,000 cubic meters of gas next year, up from just over 46 dollars today, according to the leaked internal document.

A proposed price hike has alarmed Belarus, which is deeply dependent on Russian economic support, including subsidised energy. In September, President Alexander Lukashenko warned he would cut all ties with Russia if forced to pay a fourfold increase.

Vedomosti cited a source close to Lukashenko as saying that no agreement had yet been reached between Gazprom and Minsk over a price increase.

Kommersant daily reported that steep rises are also planned for clients in the three Baltic states -- also former Soviet republics but now members of the European Union and NATO.

"Prices for gas in all the Baltic countries will be raised as high as 260 dollars for 1,000 cubic metres in 2007," Kommersant quoted Gazprom sources as saying.

The company's spokesman, Sergei Kupriyanov, told Kommersant that the Baltics would pay the "average European price."

Latvia faces a 54 percent hike to 220 dollars for 1,000 cubic metres, while Lithuania could see a 30 percent rise to 210-230 cubic metres, Kommersant reported. The head of Estonia's Eesti Gaas, Raul Komov, was quoted as saying that "the price of 260 dollars per 1,000 cubic metres is fully possible."

According to Vedomosti, Gazprom's 2007 draft budget is based on an average export price of 293 dollars (224 Euros) per 1,000 cubic meters of gas, 14 percent higher than the 257 dollar figure used in the 2006 budget.

An analyst quoted by the newspaper described the price hike as "aggressive."

Gazprom expects to sell gas on the Russian market for 49 dollars per 1,000 cubic meters in 2007, a 15 percent increase on this year, the newspaper reported.